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Mexico Raises Some Duties
After U.S. Increases Tariffs

By

Joel Millman Staff Reporter of The Wall Street Journal

Updated Dec. 13, 1996 12:01 a.m. ET

MEXICO CITY -- Mexico announced a series of tariff increases on nearly two dozen U.S. imports in retaliation against a U.S. decision to raise import duties on Mexican-made brooms, in a sign Mexican officials plan to become more aggressive in trade disputes with the U.S.

Among the U.S. items targeted: wooden furniture, brandy, wine coolers, notebooks and Tennessee whiskey. Most of the tariff increases were marginal -- those on notebooks rose from 7% to 10%, for example. However, a few items that previously would have entered Mexico duty-free now face levies as high as 20%, including sparkling wines and Jack Daniel brand whiskey.

Mexican officials said the retaliation was a warning against the U.S. for imposing tariffs outside negotiating structures set forth by the North American Free Trade Agreement, or Nafta. Mexico raised similar complaints this year in a dispute with U.S. tomato growers, who had lobbied to restrict Mexican imports.

"This constitutes the first time we have taken a position like this," a Mexican official said. "This is in response to the decision taken by U.S. not to go to a Nafta panel, but to the U.S. International Trade Commission, without considering data submitted by the Mexican government."

A U.S. decision in July subjected some brooms manufactured in Mexico to trade barriers-namely quotas and import tariffs. Mexico exported to the U.S. through September only $4.4 million of so-called corn brooms, which now would be subject to tariffs of just over $1 million.

In choosing which items on which to impose duties, Mexico says it devised a formula that would match the $1 million raised by the new U.S. tariffs. The higher duties on U.S. products "is to make an amount that gives us an equivalent effect," explained Luis de la Calle, Mexico's top trade official in Washington.

Wine makers, which felt slighted in the 1993 Nafta negotiations expressed anger that their industry-already saddled with the longest phase-in period under the agreement-will face new barriers to Mexican sales. "During the Nafta negotiations, it became perfectly clear that Mexico was not interested in opening up its wine and brandy market to California wine makers and grape growers," said Robert P. Koch, of the Wine Institute in Washington. "This latest action confirms Mexico's desire to protect its wine and brandy industry."

There are only two manufacturers of Tennessee whiskey: the Jack Daniel Distillery, owned by Brown-Forman Corp., and George A. Dickel & Co., a division of Guinness PLC of Britain. Last year, only the Jack Daniel brand was exported to Mexico, producing sales of just under $1 million. Brandy imports, also now subject to a 20% duty, totaled just over $102,000 in 1995.

Despite the modest sales, Mexico's decision wasn't popular with distillers. "We were surprised and extremely disappointed," said Lisa Hawkins, a spokeswoman for the Distilled Spirits Council, a Washington trade group.